Here are some bits and pieces I highlighted for investors over the last few weeks. Thanks as always to BNP Paribas Cadiz Securities for allowing me to republish these snippets here … it is also a touch more information that most people require, but I post it here for the record, if nothing else.

I write these under considerable time pressure – deadline 06h30 0n Monday mornings. They can sometimes be a bit scrappy, but mostly (although with exceptions) still relevant a few weeks later. Where I say ‘yesterday’ or ‘today’ (or whatever) I mean: relative to the date in the highlighted headline above each section. The newest is on the top – stretching all the way back to the ancient history of Nkosazana Dlamini-Zuma at the US-Africa summit in Washington.

01/09/2014

Lesotho, South Africa … and the Guptas

Lesotho Prime Minister, Thomas Thabane, was assisted by South African special forces soldiers to flee to South Africa in the face of a military backed ‘coup’ on early Saturday morning. The ‘coup’ (or ‘coup attempt’ – both terms are used extensively in the coverage) was allegedly orchestrated by Deputy Prime Minister Mothetjoa Metsing.

The key features of the event were the co-ordinated encircling of police barracks by the military, the disarming of the police and the seizing of the national broadcaster in the country’s capital Maseru on Saturday. (Sunday Times, Voice of America, City Press, Sunday Independent – 31/08/2014).

The Sunday Times story suggests the ‘coup’ was sparked by Friday’s firing of army chief Lieutenant-General Kennedy Kamoli by Lesotho’s King Letsie. The City Press reports that South African troops are on standby for further interventions.

Lesotho army spokesman Major Ntele Ntoi has denied there was a coup and says the army’s actions were purely to disarm police “who had been preparing to provide weapons to political parties” – Sunday Times.

Thabane, in a phone interview with Voice of America, said he was not going back until his safety was secured, that there was a situation of “total indiscipline” in the army and that soldiers were “running around the streets, threatening people” and “quite openly stating that they want my neck” – see here for VOA coverage.

So what?

This is almost too bizarre to type out, but here goes: a significant portion of the coverage of the event refers to the recent controversy surrounding the issuing by Thabane of diplomatic passports to the Gupta brothers (who we know better as key Zuma and ANC backers and funders, see Mail and Guardian coverage “The Grim Tales of the Brothers Gupta” for background).

At the time of the appointment Thobane said “(t)hese people (the Guptas) are good friends of the ANC and we have good relations with the ANC … I was introduced to them by ANC president [Jacob Zuma] and other ANC officials… I then appointed them to help scout for investment in my country. They have influence in a number of countries that can help Lesotho” – see here for that story.

In highly interpenetrated and interdependent systems of patronage and corruption, unsuccessful attempts to defend one part of the system can unravel the whole system and cause destabilisation throughout the linked networks.

Jacob Zuma’s Russian rest

Jacob Zuma visited Russia this week for six days. He had a light schedule and was, unusually, only accompanied by State Security Minister David Mahlabo and Deputy Minister of International Relations and Cooperation Nomaindia Mfeketo. There has been widespread but largely fruitless speculation about what the President was doing in Russia. (See City Press’s “Jacob Zuma’s mysterious mission to Russia” and former leader of the opposition DA Tony Leon in the Sunday Times in an opinion piece titled “How much more abuse can the constitution take from Zuma?” … unfortunately can’t find a link to that.)

So what?

The crisis faced by Russian President Putin is, by all accounts serious and urgent – and it might seem unlikely that he would have made time for a casual tête-à-tête with Jacob Zuma. Thus we can assume that Putin was in part motivated by wanting to demonstrate he still has friends in an increasingly chilly world. Also there is the sourcinig of agricultural products to fill the gaps left by European and US sanctions against Russia over Ukraine – a job South Africa could be well placed to do.

However Jacob Zuma appeared less to be representing South Africa and more on a personal visit – with several reports, including from government, that he would use the opportunity to rest.

It is difficult to escape the perception of two embattled leaders involved in a perhaps complicated exchange and attempting to secure their present and future:

there is the upcoming ZAR850bn nuclear build programme that probably depends on Jacob Zuma staying at the helm in South Africa – Russia reportedly hopes to be central to that programme.

Jacob Zuma’s key spy chiefs all reportedly resigned when he (Zuma) refused to allow them to investigate the Gupta brothers as a serious threat to national security (see back story on that here).

Jacob Zuma faces unprecedented blowback at home, including the possibility of a public discussion around the original fraud, corruption and racketeering charges against him (see here) now that the famous Spy Tapes are to be handed to the Democratic Alliance in the official opposition’s attempts to have the National Prosecuting Authority’s decision not to charge Zuma reviewed.

Also in yesterday’s Sunday Times was an important ‘leaked’ story that South Africa had sent a large group of intelligence officers to be trained in Russia and that “the Russians have recruited at least four of our people, which means we are sitting with double agents” – according to an unnamed source “with inside knowledge of the programme” – Sunday Times 31/08/2014.

Jacob’s Ladder (geddit?) and check out the body languege (Pic from GCIS)

It is not inconceivable or unreasonable to consider the possibility that Jacob Zuma is asking for intelligence and security coverage and offering in return nuclear contracts and public expressions of support. It’s not a perfect theory, but some kind of explanation is required.

Ruling alliance divides itself neatly on defending or attacking the public protector – is Jacob Zuma becoming a cost the ANC cannot bear much longer?

Zwelinzima Vavi, Cosatu general secretary, broke ranks with the ANC on Saturday arguing that the Public Protector’s recommendations on resolving the Nkandla dispute (in which over ZAR200 million of public money was spent irregularly on Jacob Zuma’s private house) should be implemented immediately … “all of them, without exception.” Vavi went on to say that criticism of Madonsela were “absolutely disgusting, to say the least”– Vavi in the Sunday Times 31/08/2014.

So what?

While the main structures of the ANC and its government attempt to close ranks around Jacob Zuma as the multiple scandals unfold and the threats against him grow, the hegemony is crumbling and the edges.

The ANC still has a comfortable electoral majority although as I have pointed out on many occasions, at least part of the electoral declines the ruling party experienced in May, especially in the sophisticated metropolitan areas of the economic heartland of Gauteng, have to do with perception of corruption and mismanagement at the top. It is difficult not to concur with the implicit meaning of the headline of Barney Mthombothi’s column in the Sunday Times yesterday which reads: “ANC courts its own destruction”.

We must consider that the cost of defending Zuma’s multiple infractions is starting to tell on the ANC (as it is telling on the party’s alliance with Cosatu).

I would reason that the ANC’s brand value is being seriously impacted by Jacob Zuma’s presidency and that, almost as a natural law, such a threat to value will call into being an attempt to defend the value by those who have the most to lose (other leaders and members of the ANC)

It’s the future, so I am guessing, but I think it is an even chance that Jacob Zuma will be moved into retirement within the next two years and that the official reasons will be related to his health.

(This added as I post these comments here: the above several paragraphs might be wishful thinking. If you want to see a well reasoned opinion that takes the opposite view, see the interesting Daily Maverick column by Ranjeni Munusami arguing that Zuma will see out his second term. I suspect that I just can’t live in a world where the thugs get away with it for ever (this paragraph was edited after posting – Ed)

The Ebola (haemorrhagic fever) epidemic ‘sweeping’ West Africa has killed approximately 1500 people and the first cases have been confirmed in Senegal, having up until now being confined in Sierra Leone, Liberia, Guinea and Nigeria.

So what?

Ebola was first identified in the north of the Democratic Republic of the Congo in 1976 and outbreaks have been common in Central and Western Africa since that time. The disease is isolated and confined to countries with weak public health systems and high levels of poverty. In all the news coverage, the headlines tend to be more alarming than the content of the stories. There are various experimental drugs in trial (including one made jointly by GlaxoSmithKline and the US government which has achieved high levels of success) – Sunday Independent – 31/08/2014.

25/08/2014

Pay Back the Money … or we’ll huff and we’ll puff

Julius Malema and his cohorts in the National Assembly didn’t quite blow the House down on Thursday last week during President’s Question Time.

They disrupted parliament by demanding that Jacob Zuma pay back a portion of the costs of upgrades to his Nkandla home, as specified by the Public Protector Thuli Madonsela. Their chanted refusal to accept the stock brushoff from Zuma and the poor management of the showdown by Baleka Mbete, Parliamentary Speaker (and ANC National Chairperson), is the leading edge of yet another storm that concerns Jacob Zuma’s integrity – and the ability of the constitutional mechanisms to hold him to account. (Here for a useful and interesting take on festivities.)

But political theatre becomes something more serious as the Public Protector and the ANC and its allies go head-to-head on the issue

Several Sunday papers reported yesterday ( 24/08/2014) that the Public Protector Thuli Madonsela has sent a letter to Jacob Zuma criticising several aspects of his response to her Secure in Comfort report and specifically arguing that he (Zuma) did not have the constitutional right to set aside or review her findings or to allow Police Minister Thathi Nhleko to do so (in essence Zuma has asked Nhleko to determine what his – Zuma’s – financial obligations are with regard to the Nkandla security upgrades).

According to constitutional law expert Pierre de Vos Madonsela is well within her rights. “This is not legally controversial,” he says, quoted in today’s Business Day (25/08/2014). “The president is either receiving appallingly bad legal advice or he is wilfully abusing his power and thwarting the law to protect himself in order to unlawfully benefit financially from the state.”

Both the ANC and the SACP came out late yesterday afternoon strongly critical of Madonsela, arguing that she had overreached herself, especially as a parliamentary committee was currently dealing with the matter.

So what?

The clash in parliament on Thursday made a significant media impact and it seemed for a moment that the damage being done the ANC by the party endlessly having to defend its wayward leader could conceivably lead to some profound political realignment.

But that feeling was brief.

The EFF has 25 MPs in the National Assembly, to the ANC’s 249 and the DA’s 89. The chances are, the ANC in parliament will work out a set of rules that essentially disciplines the EFF (already MPs may be suspended for not more than 30 days and have their salary docked for the same period).

Jacob Zuma is a master at diverting crises like this into long (perhaps endless) processes that have a degree (or at least a semblance) of legitimacy and constitutionality. And there is a parliamentary process dealing with Nkandla underway and whether this process is an attempt to ‘set aside or review’ the Public Protector’s findings could be the subject of years’ of constitutional debate, such that many of the players will be long gone by the time it is resolved.

There is considerable stability in a system so tightly bound within itself through links of patronage and shared loyalties – although I suspect that when such a system eventually unwinds, it unwinds quickly and perhaps catastrophically.

Jacob Zuma is off for a week in Russia – to work and to rest – and the game will go on. “The visit will further strengthen the excellent bilateral relations with a view to consolidating and opening new avenues towards job creation, skills development, exchange and transfer of technology and trade and investment,” said the Department of International Relations yesterday.

There may be some future moment when the ANC could face electoral losses because of public perceptions about corruption of its leaders, but that day is still far enough ahead to not impact (in any meaningful way) upon behaviour in the present.

(So … that isn’t a direct contradiction on what Nic thought on September 1, but it is more than a little close. I strongly suspect it might be a biorhythm, or hormonal thing – Ed)

Julius Malema … how did he ‘Pay Back the Money’?

Julius Malema appears in court today to face questions about where he got the money to pay his R18 million tax bill. According to Rapport newspaper (24/08/2014) the South African Revenue Service (Sars), would ask for a two-month extension of Malema’s provisional sequestration to determine where he got the money to repay his tax debt each month. The newspaper reports that “impeccable sources” allege that “cigarette smuggler Andriano Mazzotti was helping to pay his tax debt” – as re-reported at the Independent Online 25/08/2014 – see here. (I don’t know the Afrikaans language Rapport newspaper well – it is part of Naspers’s Media24 stable – treat the claim with maximum caution). (Not because of Naspers of Media24 – for so are they all, all honourable men … the caution is purely because the claim is faintly outrageous, which doesn’t mean it’s not true – Ed)

So what?

While Julius Malema’s insistence that Jacob Zuma account to parliament is welcome, we should be careful to not lose our sense of discernment. Julius Malema himself has faced a long list of accusations similar to those he is making against the ANC and Jacob Zuma.

Land and wage reform – unintended consequences

Two interesting articles in the Sunday papers hint at some of the negative unintended consequences of attempts to protect the interests of the marginalised and vulnerable workers on South African farms.

Firstly, the Sunday Times (24/08/2014) has a colour piece titled “Good intentions pave the road to rural hell” in which the 1997 Extension of Security of Tenure Act is assessed as having “led to as many as a million farmworkers being evicted countrywide”.

Secondly, the Sunday Independent (24/08/2014) records an interesting discussion about the impact of ‘minimum wage’ determinations on employment. The article shares different views on the matter, but concludes that in SA agriculture “the impact was devastating: Employment fell from 819 048 jobs in 2002, just before the law came into effect, to 623 750 jobs in 2003 and continued to decline to 555 549 jobs in 2007 – a net loss of almost a third in five years.”

So what?

The ANC has signalled an urgent desire to ‘get serious’ about land reform. As we have mentioned previously ‘the land question’ seems to suggest to the ANC an answer to a host of social needs: employment, housing, food security, and black economic empowerment, to name only the most obvious. Racially unequal land ownership patterns (it is generally quoted that SA had 87% of land in white hands at the 1994 transition and that less than 8% has been redistributed since – see here) are also a driver of political dissatisfaction, perhaps helping feed the growth of the EFF and other ‘radical’ forces emerging in the society.

For now government is preparing a host of new legislation and regulation all the while signalling to commercial agriculture that it wants to be met half-way. There will probably be unintended consequences of government’s land reform and rural development programme (including negative impacts) but the lessons from the banking sector (for example with regard to the formulation of the National Credit Act) is that it is always a better idea for the private sector to go out and engage with government and attempt to shape legislation than it is to wait and deal with the future when it is a fait accompli.

21/08/2014

Mining, oil and gas sectors: legislative and regulatory drift and a scary audit

Mineral Resources Minister Ngoako Ramatlhodi didn’t calm nerves last week during his address to the third annual Mining Lekgotla. The minister is overseeing two significant regulatory processes causing anxiety in these sectors, namely a major audit of mining companies’ compliance with the 10 year targets of the Mining Charter and the signing into law of a bill amending the Mineral and Petroleum Development Act of 2002 (which the private sector thought it had essentially cautiously agreed to in exchange for it – the private sector – being consulted in detail about the regulations that would arise from the legislation).

With regard to the audit, Minister Ramathlodi said: “(w)hile the review process on the implementation of the Mining Charter is still under way, initial results suggest that whatever compliance we may have achieved, much more work still needs to be done” – Business Day -14/08/2014

With regard to the legislation the Minister said he had not been informed by the Presidency whether or when the bill would be signed into law. “There are legal teams that look at any legislation coming before the president and they advise him. When they do so we’ll act on that advice” – Business Day ibid. Download Minister Ramatlhodi’s full address at the DMR website here.

So what?

Firstly, the audit obliges the mining companies to meet various ‘transformation’ obligations and targets by 2014 e.g., 26% of the company must be owned, through “full shareholder rights”, by HDSA (Historically Disadvantaged South Africans) by the end of this year – as a precondition for the retention of the mining right. Go to www.dmr.gov.za to see the “Mining Charter” and the “Scorecard for the Broad-Based Socio-economic Empowerment Charter for the South African Mining Industry” to get a full view.

2014 is the year in which several definite obligations must be met by the mining companies and there is a degree of nervousness by investors and management as to how strict the audit will be, how much leeway the ministry will give and how severe the consequences of failure will be.

Purely the administrative aspects of the reporting process are enough to be a serious burden for smaller mining companies, according to Nic Dinham, Head of Resources at BNP Paribas Cadiz Securities

The apparent prevarication in signing the Mineral and Petroleum Resources Development Act Amendment Bill, after months of careful negotiations between the department and the mining companies, has caused the industry to worry that deals struck and compromises made might be up for renegotiation. There was a general expectation that the constitutionality of the amendments would need to be tested and examined (especially government’s 20% proposed free-carry interest in all new exploration and production rights in the oil and gas sector). It appears to me that the delays are adding to a more generalised sense of uncertainty about the growing regulatory burden and costs associated with continuing to mine in South Africa.

Amcu set to go on the offensive at Num’s last toeholds in the Platinum sector – non-cyclical risk factors in the SA labour environment escalate

Nic Dinham (BNP Paribas Cadiz Securities Head of Resources referred to in a previous section) said yesterday that in the platinum operations where Amcu is not (yet) the major union (at several mines, but including those operations at Aquarius Platinum and Northam Platinum) there were significant indications that Amcu was close to recognition thresholds (specific to each company) and that it was reasonable to expect increased labour unrest at the particular operations and companies where Num was clinging to a majority.

“During the recent result presentations, several companies reported that operations previously dominated by Num are showing signs of losing ground to Amcu, especially in the Rustenburg areas”, said Dinham.

“This is the case at Aquarius Platinum as well as at Northam where Amcu membership has risen to 30% and 15% respectively, just short of both companies’ recognition levels. Clearly, this could be the harbinger of more labour storms to come. At the same time, only small numbers of workers in the existing Amcu fortresses switched to NUM after the end of the strike. So, despite all the rational arguments about the financial impact of the strike on labour, Amcu appear to have won the propaganda war with the mining industry” – Nic Dinham, 20/08/2014.

So what?

There are a number of important implications, not least of which is the confirmation (and deepening) of the implicit defection of mineworkers in the Platinum sector from a key ANC aligned union (Num) and the continued disintegration of previously powerful trade union federation and ANC ally, Cosatu.

In some ways this frees the ANC (and government) to decide on economic policy without having to kowtow to Cosatu, but it will also raise anxieties in the ruling party about the narrowing of its base – and a diminishment of its hegemony and moral authority.

None of that is necessarily a bad thing. It is my opinion that our legislative and regulatory environment has tended to suffer from a lack of clarity and focus as a result of the ANC attempting to keep a number of different legacy constituencies (and sectional interests) happy and on-board.

However, it is also worth noting that my general expectation of a deteriorating labour environment is strengthened by concerns about labour unrest driven by further contestation between Amcu and Num. This, together with a coming trial of strength in all (or most) Cosatu unions that will accompany the impending Numsa split out of Cosatu will be a strong, non-cyclical, driver of labour unrest for the next 18 months. Jeff Schultz (BNP Paribas Cadiz Economist) and I recently suggested that these strands driving labour unrest, along with what we expect will be a major confrontation that will accompany the lead-up to the expiry of the current 3-year public sector wage agreement in March 2015, will keep labour risks at elevated levels in the South African investment environment for at least another 18 months.

Cyril Ramaphosa – a hard week down at the Commission

Deputy President Cyril Ramaphosa last week faced an avalanche of criticism and heckling at the Farlam Commission (which is investigating the killing of 44 people at Marikana on and before August 16 2012 in the context of the protracted strike at Lonmin mines in the Rustenburg area at that time).

Cyril Ramaphosa was called to the commission to explain his actions in the lead-up to the Marikana killings. Ramaphosa was on the Lonmin board at the time and in an email to Lonmin managers he said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”. In both these cases I have added the emphasis.

At the Farlam Commission hecklers shouted “Blood on your hands” (City Press 11/08/2014) during Ramaphosa’s cross-examination. Hecklers wore T-shirts with several different slogans criticising Ramaphosa’s wealth, for example one showed a buffalo in reference to the fact that Ramaphosa bid – unsuccessfully as it turned out – R19.5 million for a buffalo cow and her calf at a wildlife auction a month after the Marikana killings in 2012.

So what?

There is a high level of speculation as to whether Cyril Ramaphosa will succeed Jacob Zuma as president (when the current presidential term expires in 2019 or at some earlier date due to Jacob Zuma’s purported ill health.) There appears to me to be a widespread assumption in the financial markets that Cyril Ramaphosa, as an experienced businessman and an experienced negotiator and conciliator who was central to easing the transition at Codesa 1 and 2 in the early 90s, would be more sensitive to the needs of the private sector, more compliant with global capital markets and, generally, run a cleaner and more efficient ship.

Implicit in that list of attributes is the person who Ramaphosa would be cleaner than, more conciliatory than, more understanding of private sector needs than, is Jacob Zuma. It is impossible to know either that Ramaphosa really has such attributes relative to Zuma or that it is really or primarily those attributes that make Ramaphosa a more attractive choice than Zuma for the financial markets … or, in fact, whether the ‘financial markets’ really makes these kinds of distinctions.

It is my impression that Jacob Zuma’s rise to power and performance as president has been accompanied (and in several cases directly caused) increased political risks associated with investing in the country. Almost any successor would probably be welcomed by the markets. However we would be cautious about seeing Ramaphosa as the knight in shining armour. He is badly damaged by his link to the Marikana killings (unfair as that may be) and he has not yet established a significant constituency within the ANC. The fact that he is a rich man can play both ways; it gives him resources to build his case but it makes him vulnerable to accusations of conspicuous consumption and being out of touch with common people. It is also inescapably true that his wealth has been accumulated more as a result of ‘empowerment deals’, the accumulation of large slices of equity, rather than the involvement in any of the underlying activities (mining, banking, health care etc).

More than anything we must keep front of mind that much ANC policy and politics is determined in the forums of the party – long in advance of such policies and politics becoming law and regulation. The particular character of leaders makes a difference, but in the South African case, not as big a difference as it might elsewhere.

The noise around land reform is (partly) bluster designed to get commercial agriculture to act voluntarily

Urging Commercial farmers to take voluntary steps ‘advancing the transformation project in the agriculture sector’, ANC Secretary General Gwede Mantashe said “change that is imposed is more painful” – Business Day 14/08/2014. Mantashe told attendees at a conference on land reform and food production that land reform was necessary if South Africa was to deal with the “ugly past of racial land dispossession of black people” and that farmers must never allow themselves “to be victims of change” – Business Day ibid.

So what?

We previously described in some detail some of the legislative initiatives around land reform and one of the points we made about assessing the risks associated with the land reform initiative is reinforced by Gwede Mantashe’s choice of words.

The ANC feels keenly its failure to successfully complete a significant process of land reform and redress – and is, in part, being punished for that failure by the (still slight) electoral traction achieved by the ostensibly more radical Economic Freedom Fighters on their debut in the general election on May 7 2014.

However, the ANC feels, at least as keenly, the threats to investment that would result if property rights were ever threatened by an unruly and uncertain ‘land reform’ process à la Zimbabwe.

Commercial farming does not have the handy (from the ANC’s point of view) equivalent to the mining sector’s mineral rights to attach to a number of ‘transformation’ objectives. The ANC would be extremely cautious about bluntly attaching a ‘licence to farm’ (or in fact a ‘licence to operate any business’) directly to ‘transformation objectives’. There is a line beyond which such rights and obligations could constitute a nationalisation in fact and might be both unconstitutional and, certainly, a serious barrier to future investment.

Thus the ANC, in the form of its secretary general, is snapping at the heels of domestic commercial agriculture, attempting to herd it towards the ‘transformation’ objective, putting the argument that this is the national good, but hinting that a bite on the ankle could be the laggard’s reward. It is an open question as to whether farmers would respond to such incentives with greater compliance or with resistance, both covert and overt. However, for now, we think the ANC’s (and therefore government’s) land reform bark is worse than its bite.

Bits and pieces

Jacob Zuma put out a report last week which he and his spokespeople claim is a satisfactory response to the Public Protector Thuli Madonsela’s, “Secure in Comfort” report into the upgrades to the President’s private Nkandla residence in which she finds several faults with the President’s actions and inactions. The delay, over many months, of a response from Jacob Zuma to Thuli Madonsela was ostensibly as a result of him (Zuma) awaiting a report from the Special Investigating Unit. However, on Friday a spokesperson for the Public Protector said Zuma’s report was not a response, adequate or otherwise, to Secure in Comfort. ““That means a document that comments on the public protector’s report or indicates action taken or to be taken to implement remedial action in compliance with section 3(5) of the Executive Members Ethics Act must still be submitted to Parliament by the president” – my emphasis added.

Jacob Zuma’s team is preparing to hang expense overruns and incorrect categorisation of some items as ‘security related’ on Jacob Zuma’s architect, Minenhle Makhanya. The Mail and Guardian reports that the “Special Investigating Unit has lodged a R155-million claim against Makhanya” – 15/08/2014.

And in other news Bruce Koloane, the former chief of state protocol who was shouldered with the blame for the landing of a large private wedding party at a secure military base by the close Zuma allies and business partners the Gupta brothers and family last year, was nominated by Jacob Zuma as Ambassador to The Hague. In August last year, Koloane pleaded guilty to all charges relating to his involvement in authorising the controversial landing of the jet.

It’s not (just) idle mischief putting these bullets together. If the President’s own actions around his accumulation of personal assets and special favours to his friends can impact on the formal judicial, disciplinary and constitutional oversight functions, if his party can go to extreme lengths to protect him from the consequences of his actions in accumulating personal wealth and influence, it is unlikely that private companies will be trustful of, or willingly and enthusiastically compliant with, the ‘transformation’ agenda emerging from the state, government and party he leads. Ultimately the private sector needs to believe that the value of its various social obligations ends up benefiting those who need the assistance the most. This is the price the private sector seems prepared to pay for stability and growth. Any sense that the public purse is hijacked or that equity transfers and affirmative action obligations have become a kind of asset that can be hoarded and dispensed as patronage by the politically powerful will cause the ‘transformation’ objective – and much else – to fail.

11/08/2014

‘Cabinet leaning to break-up Eskom’ – Business Day 05/08/2014 … I would be extremely surprised

Business Day reported that the idea of breaking up Eskom and privatising some of its power stations “is starting to gain traction in government circles, as a team of cabinet ministers and government officials seeks ways to alleviate the company’s financial crisis and restructure its business” – Business Day 05/08/2014.

The governing ANC’s alliance partner, the Congress of South African Trade Unions (Cosatu) vowed the next day to fight any such privatisation “to the bitter end” arguing that electricity price inflation, driven by the ‘commercialisation’ of the utility in the first place, was “one of the key constraints” on economic growth and an important reason South Africa “is not creating decent jobs the country so desperately needs” (catch the full August 6 Cosatu statement here.)

On the same day Lynne Brown, the Minister of Public Enterprises, said “I want to indicate that there is a portfolio of options for the interministerial task team to consider. To my knowledge Cabinet has not discussed the matter of privatisation and there is no need to unnecessarily raise temperatures around this matter” – City Press Online, 06/08/2014. The ‘task team’ to which she refers was described (in the same story) as “representing energy, public enterprises and the treasury” and further, that the findings of the team had not yet been made public.

So what?

This is, supposedly, a defining issue for the ruling faction of the ANC and its allies in Cosatu and the SACP. Much of the motivation for backing Jacob Zuma (and ousting Thabo Mbeki) was – apparently – that Mbeki’s policies were a species of Thatcherism (especially the plan to privatise the major state utilities). The alliance backing Jacob Zuma defined its historical mission as the combating of this “1996 class project”, a catch-all phrase for neoliberalism, fiscal rectitude and the ‘Washington Consensus’.

It might well be true that the breaking up and privatisation of Eskom is an urgent necessity – or even a precondition for recovery from our dire economic state – but it is a political nonstarter, requiring the complete breakup of the alliance of groups that hold power, and is therefore vanishingly unlikely to happen, even symbolically.

National Prosecuting Authority in free fall and intelligence services are extensively deployed on behalf of senior politicians and criminals – and the storm is beginning to batter against the South African Revenue Service – this is as serious and urgent as it is confusing and complicated

There is an on-going meltdown at the heart of the criminal justice system which is increasing risks in doing business with, or in, the areas administered by the South African state.

Here are only a few of the most recent visible features of the (complex and confusing) disintegration:

Jacob Zuma has asked the National Director of Public Prosecutions Mxolisi Nxasana to give reasons why he should not be suspended. The apparent motivation is that Nxasana has problems associated with his security clearance (owing to his brushes with the law, including a murder charge, when he was a younger man). However, almost all the coverage and analysis suggests that the ‘real reason’ is Nxasana has pursued investigations of key Zuma allies in the NPA and Crime Intelligence Division of the South African Police Service and his (Nxasana’s) actions threaten to lead, eventually, to fraud and corruption charges being reinstated against Jacob Zuma.

Award winning journalist Mzilikazi wa Africa published his memoir last week which includes a detailed account of how Jacob Zuma and his allies vigorously undermined the credibility of the first National Director of Public Persecutions Bulelani Ngcuka by spreading the false information that he (Ngcuka) was an apartheid spy.(See an interesting examination of this thread from Business Day 07/08/2014 here.) In here is the source code of much of the chaos in the prosecuting authority and intelligence service: Bulelani Ngcuka led the original investigation into the allegations of fraud, corruption, money laundering and racketeering against the then Deputy President Zuma, concluding that there was “prima facie” evidence that Zuma was guilty, but not enough to win in court – a statement to which Zuma, not unreasonably, strongly objected.

“Sex, SARS and rogue spies” announced the front page headline in City Press yesterday (10/08/2014). The accompanying stories allege that senior SARS official, Johan van Loggenberg, has been the subject of a ‘honey trap’ operation by the State Security Agency “Special Operations Unit”. The story is Byzantine, but the important bit is the detailed allegation that the secret spy unit operating against van Loggenberg has also been used to discredit and smear a ‘anti-Zuma’ camp in the NPA and in Crime Intelligence. Bizarrely, the Special Operations Unit supposedly includes drug dealer Glen Agliotti. (Read some of this story here and here … if you have the time or the patience.)

So what?

This level of political and criminal infiltration into key state institutions and functions, especially of the security services, the prosecuting authority and the South African Revenue Service raises real questions about judicial, regulatory and legislative certainty in the operating and investment environment. Uncertainty about the application of law, the integrity of the criminal justice system and the functioning of the revenue service must all be considered by anyone wanting to invest in South Africa or in assets regulated by South African institutions of state and law. Frankly, given the deep connections between the instability in these key sectors of the South Africa state and the rise to power of Jacob Zuma I am pessimistic that we have the capacity to fix this problem while the current administration is still in power.

The National Prosecuting Authority has appointed highly respected retired Constitutional Court judge Zak Yacoob to head an inquiry, or ‘fact finding mission’ into its dysfunctional state. Unfortunately Yacoob almost immediately (on Thursday last week while speaking at a workshop at the University of the Witwatersrand) happened to mention that he would have “set aside” the judgement that found Jacob Zuma not guilty of rape in 2006, because he would have put less emphasis on the alleged victim’s sexual history – see here. An outraged African National Congress said it learned of Yacoob’s comments “with shock and dismay” saying they “opened old wounds” and were “an attack on principles of our jurisprudence and the judiciary.” Yacoob attempted to clarify his comments here but either way he is no longer likely to be the instrument that cleans up the National Prosecuting Authority.

Deputy President Cyril Ramaphosa will have to explain today at the Marikana Commission what he meant when emailed other senior Lonmin managers just before the August 12 2012 killing of 34 striking mineworkers at Marikana and said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”.

So what?

It is unlikely that the Commission will find anything untoward in Rampahosa’s messages. He was, after all, doing nothing other than responding to the growing violence of the strikers and Lonmin’s increasing anxiety about the strike. We are of the view that there is some political harm done Ramaphosa by his identification with mine management and government – and the police killing of the 34 mineworkers. There is a considerable degree of unease within the broad structures of the ANC and the electorate about the Marikana killings. The ANC is obliged to stand with its Deputy President on this matter, but it can’t be comfortable. This will play against Ramaphosa (although perhaps not decisively) in the coming succession contest in the ANC.

Nkosazana Dlamini-Zuma

Chairwoman of the African Union, fresh from pride of place at the US-Africa summit in Washington announced yesterday that she was undecided as to whether to stand for a second term in the AU (her current term expires in 2014 2016) This is inevitably raising questions about whether she will compete with Ramaphosa to succeed Jacob Zuma as president of the country.

So what?

She is in the running – and is clean and capable. She is perhaps more of an insider in the ANC’s power elite than Cyril Ramaphosa and her winning this race might mean (unwelcome) continuities with the current administration. It’s too early to call it one way or another, but the ANC Women’s League has indicated that it could back Dlamini-Zuma (or Baleka Mbete) while the Gauteng ANC has indicated it could back Ramaphosa. Officially succession would only take place after elections in 2019, but there are constant rumours that Jacob Zuma might want to retire early (or be forced to do so due to failing health). An early retirement of Jacob Zuma would probably be a significant positive for perceptions about South African political risk, but the specific circumstances of such a move would determine whether it would, in fact, be positive, negative or natural.

That usually means typos and misspellings that I have failed to find in a rushed edit, but sometimes it means the analysis is … less in-depth (trite? … shallow? … Ed) than I would have liked.

It’s the price of procrastination when chasing deadlines – and one of those deadlines was two weeks ago when I rushed to get a weekly update out just as the news from the Brics summit was coming in. This is what I wrote (tagged on to a longer report about a number of different matters):

Brics bank (16/07/2014)

Leaders of China, India, Russia, Brazil and South Africa met at the 6th Brics summit in Fortaleza, Brazil yesterday. On the agenda is the establishment of a development bank and monetary reserve – eventually together consisting of as much as $200bn in capital reserves and guarantees.

So what?

There are a number of important issues associated with this initiative, but one is that this is a deliberate attempt to institutionalise a shift away from the Western (specifically US) dominated financial system (particularly the IMF, the World Bank and the use the USD$ as the global reserve currency). Such moves are probably historically inevitable and as China, India and Russia – and to a lesser extent Brazil – stutteringly grow in influence (economically, militarily and otherwise) they were always going to gently tug at the leash of US global dominance.

For South Africa – a small regional player, with anaemic economic growth and very moderate political/military influence – to have attached itself to the coattails of a kind of teenage rebellion by the powerful young global bucks is faintly ridiculous. South Africa winds up being drawn into a subservient relationship with China and Russia (over which it has almost no influence) and thereby flirts with the enmity of the real global adult whose judgements, when push-comes-to-shove, can be quite severe. That’s a lose-lose, as far as I can see.

Nothing wrong with the comment, although I wish I had made it clearer that I welcome Brics and I welcome the gradual receding of US power as much as I hope its retreat is orderly.

It’s not specifically about the Brics Bank (but it does mention it in context) but it is an excellent high level analysis of the growing contest between the US and China … and it argues that this is a matter of national security and national interest for South Africa.

Read the article … meanwhile, here are a few extracts:

“The emerging geo-political great game between the USA and China is of great importance to Africa and South Africa. How this great power relationship unfolds will have a commanding influence on the 21st century.

“The future cannot be known; but probability and prediction can be improved as well as surprise avoided, if we are assisted by facts – by a proper understanding of what is going on – as well as by quality information, good theory and off course, secrets.”

“In statecraft, the purpose of intelligence is to provide a competent decision-maker with an informational advantage in the context of national security and the pursuit of national goals.”

“The launch of the New Development Bank (NDB) and of the Contingency Reserve Fund (CRF) by the BRICS-countries in July 2014 is a powerful signal that developing countries are no longer willing to play second fiddle on the global stage.”

“The desired post-Bretton Woods era does not only contain different global financial institutions – not controlled by the USA – but some analysts believe, also rests on different values … the need to prioritize physical infrastructure over other priorities (such as education, healthcare, women’s rights, etc.) towards which the World Bank has been drawn in recent decades. From a holistic point of view, all such investments are crucial for equitable national prosperity and well-being, but nothing creates jobs and literally drives ‘state-building’ like infrastructure.”

There is much in the article that is worthwhile and I recommend it to anyone who is interested in the unfolding contest between the USA and China especially from a South African perspective.

Andre’s vantage point is especially interesting. He “is a former senior official in the State Security Agency of the democratic South Africa” and has previously “worked in the underground and intelligence service of the African National Congress during the struggle against apartheid and subsequently, served in the Presidential Support Unit under former President Thabo Mbeki” – those quotes from here.

Important defection from the ANC to the EFF, and the DA launches robust campaign in Soweto – but it is probably not yet enough to scare the ANC

Appropriate concern grows at the Promotion of Investment and Protection Bill

Stunning victory in eastern DRC is becoming a feather in Zuma’s cap …

… while the chaos in the SAPS and crime intelligence is a serious indictment of South Africa’s political leaders – and is threatening the investment environment

Herewith my latest news summary and analysis.

As I have mentioned previously, I write these updates very early on Monday mornings for the paying clients of BNP Paribas Cadiz Securities. So thanks to those good people for allowing me to republish a few days later here (and thanks to them for giving me a fairly loose rein as to the style I am allowed to use).

Dali Mpofu announces defection from ANC to EFF
Dali Mpofu, advocate of the miners who were killed by the police in Marikana and a former CEO of the SABC, announced over the weekend that he was leaving the ANC and joining the Economic Freedom Fighters. While this is not completely unexpected (he represented Julius Malema in the ANC disciplinary hearings against the former ANCYL chairperson) Mpofu is perhaps the most mainstream figure to formally defect from the ANC and declare for the EFF.

So what?

This is my ‘shifting target’ predictions for the 2014 national election as of Friday November 1 (click on the graphic to see the details … and note the cute child sucking her thumb which is a graphic metaphor indicating I am making this up as I go along):

Some of you who saw those estimates in September might notice that I have massaged the EFF upwards and AgangSA downwards.

My Democratic Alliance results are probably too generous, although the pictures published in Afrikaans weekly Rapport on Sunday (11/03/2013) of the DA’s Gauteng premier candidate Mmusi Maimane’s launch of his campaign in the Walter Sisulu Square in Kliptown, Soweto on Saturday indicate a surprisingly robust start.

My caution about the upside for the DA is based on the history of outcomes in the four national elections since the advent of democracy in South Africa in 1994 (again click on the graphic for a version large enough to read … note DA at 16.66% in 2009 and ANC at 65.9% … hmm):

One would have to suggest that the DA has set itself too difficult a task in declaring that it hopes to achieve 30% of the national vote and be in a position to form a provincial government in Gauteng in an alliance with other opposition parties after elections in 2014. The EFF and AgangSA are likely to eat into ANC support but the challengers have a mountain to climb and the incumbent has to fall a long way before the climbers even catch sight of their objective.

Concern grows at the Promotion of Investment and Protection Bill

Legislation designed to replace a number of bilateral investment treaties that South Africa has maintained with over a hundred trade and investment partners was published in the government gazette on Friday and is starting to raise concerns among investors. Already Minister of Finance Pravin Gordhan has angrily blamed “lawyers serving the private sector” for increasing uncertainty in South Africa’s investment environment with regard to this legislation (in a deeply unhelpful statement he made on the side-lines of the African Economic Conference at Montecasino in Johannesburg last Monday – Business Day 28/03/2013).

So what?

At the height of the campaign for the nationalisation of mines during 2012 (by Julius Malema and the ANC Youth League) it was South Africa’s myriad bilateral investment protection treaties that were the strongest argument of reassurance for foreign investors. The problem is less the new legislation, and more that fact that existing treaties will not be renewed. Business Day in its front page lead story this morning says the decision not to renew the treaties has been criticised “by a range of groups, from foreign business to credit agencies for causing uncertainty over the security of future foreign investment”. An informed legal opinion would be a requirement for the proper assessment of the risk here, but it is appropriate to approach this policy and legislative shift with caution.

Jacob Zuma attempts to fill the Great Lakes power vacuum

In the light of a stunning and quick Congolese army (FARDC) victory over the occupying M23 rebels last week, Jacob Zuma has moved quickly to reinforce South Africa’s apparent sovereign advances in the region. Today he will host a joint summit of southern African and Great Lakes leaders in Pretoria to seek ways of consolidating this week’s victory by the FARDC and its Southern African allies … and on Tuesday he will chair another summit designed to kick-start an African Union plan for volunteer governments to form “coalitions of the willing” to tackle continental conflicts – Sunday Independent 03/11/2013.

So what?

The contending interests in and around the Eastern Congo are extraordinarily complex, but from a South African perspective the apparent defeat of the M23 is a success for the SADC Force Intervention Brigade (FIB) to which South Africa has contributed more than 1 300 troops alongside 1700 from Tanzania and Malawi. The M23 is backed by Rwanda which in turn is an ally of the US and the UK in the region. Crucially, those Western powers have warned Rwanda’s President Paul Kagame to back off supporting the M23 – which is probably what left the rebels vulnerable last week (Sunday Independent and other several other sources).

There are significant mineral resources in the region and the Inga hydroelectric projects might become decisive to economic development in several southern African countries. Stability in the eastern DRC impacts on Uganda, Tanzania, Rwanda, Sudan and even Angola, Zimbabwe and South Africa. Jacob Zuma has managed to shift significant obstacles out of the way of reformatting alliances in the region – an objective that eluded Thabo Mbeki. The situation is delicate and tentative but Jacob Zuma’s decisive follow-up indicates he is seizing the historical moment and the initiative in a manner that we would have thought unlikely a year ago.

The DRC is a Zuma plus but Crime Intelligence and the SAPS is deepening minus

The main domestic weekly newspapers (Mail & Guardian, Sunday Times, Sunday Independent and City Press) all attempted (unsuccessfully) to make sense of the damaging disarray and conflict in various aspects of the South African security services, most importantly in Crime Intelligence, the Hawks and the top echelons of the South African Police Services itself.

Last Monday the national police commissioner Riah Phiyega issued a suspension letter to the acting Crime Intelligence head, Chris Ngcobo (on the basis that there is some unspecified problem with Ngcobo’s qualifications). Almost immediately afterwards a spy tape emerged and was leaked to the press that indicated Riah Phiyega was guilty of a crime by having “tipped off Western Cape police boss Arno Lamoer about a crime intelligence investigation linked to him” – Mail & Guardian.

So what?

You have to go to the source code for what is happening here because the details of each claim and counter-claim are impossible to follow. Essentially the police, and particularly Crime Intelligence, have been profoundly damaged by having been drawn into high-level political contests, particularly those between former president Thabo Mbeki and then challenger Jacob Zuma. Significant parts of these apparatuses have become semi-criminal and out-of-control, pursuing sometimes arcane political (and worse) agendas. The top echelons of our political establishment are directly implicated in and linked to this chaos – having deployed these institutions in their internecine battles. No individual institutional failing in South Africa is more serious and more threatening for those seeking stability and certainty in the regulatory and institutional environment.

Jacob Zuma has forced me to reread Niccolò di Bernardo dei Machiavelli’s The Prince, published 500 years ago this year.

He (Jacob Zuma) didn’t threaten me with the red lightsaber or catch me in a honey trap. My natterings, fortunately, are not impactful enough to draw the attentions of the Dark Lord (Darth Vader, dah! – ed) or his stormtroopers.

The compulsion comes from watching, slack-jawed, as Jacob Zuma skips happily across the backs of starving crocodiles – on his way, off towards the welcoming horizon.

Surely the world was an intrinsically hostile place for a black baby boy, born to a single-parent mother (who was also a domestic worker) in the South Africa of 1942? Surely when he received no formal education any chance of success in life would have become vanishingly small – in the estimation of a wandering actuarial statistician, perhaps?

When Jacob Zuma went to prison and then later was repeatedly caught with his hands in all sorts of cookie jars I imagine the hypothetical actuary would have confidently predicted a life of ignominy and poverty.

But instead Jacob Zuma is picking up an honorary Doctorate of Leadership from the Limkokwing University of Creative Technology (who writes the script of the world? … no ordinary mortal would dare make this shit up – ed) and rubbing shoulders with the great and the good and undoubtedly stashing bits of his loot in safe houses in Malaysia.

My second post on this website in mid-2009 titled The Accidental President (catch that here) argued that Zuma’s rise was pure chance and contingency. But when the same random set of things happens over-and-over (Jacob Zuma escapes danger with a sack full of cash) you have to start questioning whether this is purely the shambolic interactions of events, people, history and the world.

Politics is about power (yes, I know, we have heard that somewhere before). Power is agency, the ability to make stuff happen, to make people do your bidding and to make situations turn out in a particular way. Political analysis is the analysis of how (and why) power is exercised.

Which brings me back to Machiavelli.

I read The Prince when I was about 17 and, clearly, I didn’t understand a bleeding word.

I vaguely remember being outraged and confused by the book. Bertrand Russell is widely quoted as having said The Prince is a handbook for gangsters (which is a great line but there is much debate as to whether the great logician himself actually said it).

However, I am now kicking myself that I haven’t been reading and rereading The Prince every year – and in the flush of my transient enthusiasm, I promise myself I will do so from now on until I die … or perhaps I will stop a little before.

(As an aside: I was halfway through the book when the Syrian nerve gas story broke. I was glad to have Machiavelli as a companion to think about how those with agency might cause, or allow, such things to happen and why they might do so.)

So, anyway … Jacob Zuma is the Prince and I doubt he ever needed a Machiavelli to tell him how to be what he is and how to do what he does.

Here is the opening dedication. It’s quite compellingly mysterious to those among us who are a little thin on our Florence-during- the-Renaissance, but it is also a good explanation of the work that follows:

Dedication: To the Magnificent Lorenzo Di Piero De’ Medici

It is customary for such as seek a Prince’s favour, to present themselves before him with those things of theirs which they themselves most value, or in which they perceive him chiefly to delight. Accordingly, we often see horses, armour, cloth of gold, precious stones, and the like costly gifts, offered to Princes as worthy of their greatness. Desiring in like manner to approach your Magnificence with some token of my devotion, I have found among my possessions none that I so much prize and esteem as a knowledge of the actions of great men, acquired in the course of a long experience of modern affairs and a continual study of antiquity. Which knowledge most carefully and patiently pondered over and sifted by me, and now reduced into this little book, I send to your Magnificence. And though I deem the work unworthy of your greatness, yet am I bold enough to hope that your courtesy will dispose you to accept it, considering that I can offer you no better gift than the means of mastering in a very brief time, all that in the course of so many years, and at the cost of so many hardships and dangers, I have learned, and know.

This work I have not adorned or amplified with rounded periods, swelling and high-flown language, or any other of those extrinsic attractions and allurements wherewith many authors are wont to set off and grace their writings; since it is my desire that it should either pass wholly unhonoured, or that the truth of its matter and the importance of its subject should alone recommend it.

Nor would I have it thought presumption that a person of very mean and humble station should venture to discourse and lay down rules concerning the government of Princes. For as those who make maps of countries place themselves low down in the plains to study the character of mountains and elevated lands, and place themselves high up on the mountains to get a better view of the plains, so in like manner to understand the People a man should be a Prince, and to have a clear notion of Princes he should belong to the People.

Let your Magnificence, then, accept this little gift in the spirit in which I offer it; wherein, if you diligently read and study it, you will recognize my extreme desire that you should attain to that eminence which Fortune and your own merits promise you. Should you from the height of your greatness some time turn your eyes to these humble regions, you will become aware how undeservedly I have to endure the keen and unremitting malignity of Fortune.Niccolò Machiavelli

……………………………………………………………..

I know how Niccolò feels. Sometimes these humble regions are just that little too humble. However, I would have been more cautious about calling for the Prince’s attention if I was Machiavelli. If the Prince read the little book, then the Prince would know that Machiavelli had the Prince’s number and that Machiavelli had rewritten the handbook. Which I can’t imagine would have charmed the Prince.

I will attempt a ‘highlights package’ of The Prince and possibly some learned comments (which are unlikely to be as good as you will find in this interesting article and interview). For the keenest among you, there are several places on the internet where The Prince is downloadable for no charge – I am sure the copyright has long expired … or rather I hope so. My copy, which is in electronic form on my laptop, originates at: http://www.feedbooks.com.

Finally, Jacob Zuma still has a few crocodiles to hop on before he reaches safety. I still think that the odds are against him, but I am not an actuarial statistician, wandering or otherwise . I draw comfort purely from the certainty that no-one, ultimately, gets out of this alive.

Vavi and Numsa – the underlying risks

Zwelinzima Vavi faces a special central executive committee of Cosatu meeting today to decide his fate following his admission that he had sex with a junior Cosatu employee in her office in the Cosatu headquarters. Numsa, the National Union of Metalworkers of South Africa (perhaps Cosatu’s largest union after the collapse of Num in the face of Amcu competition) characterises the attempt to discipline, and possibly shaft, Vavi as “a real rupture in the Alliance, and therefore in Cosatu, the ANC and the SACP between the forces of socialism and the forces of neoliberal capitalism”. There is widespread speculation that Numsa might exit Cosatu if Vavi is axed.

So what?

It would be a mistake to dismiss Numsa’s position as just so much socialist babble and dissembling (although I did I see a recent Numsa paper defending Vavi with this quote from the Communist Manifesto: “The proletarian is without property; his relation to his wife and children has no longer anything in common with the bourgeois family relations … law, morality, religion, are to him so many bourgeois prejudices” – tee hee ).

Numsa reads the pressure being placed on Vavi as rooted in Vavi’s criticism of the ANC leadership with regard to corruption and with regard to the ANC’s adoption of the National Development Plan. For Numsa and ‘the left’ in Cosatu/ANC/SACP, Vavi’s sexual practices are irrelevant, the ‘real’ issue is that the Zuma-led ANC and its allies in Cosatu and the SACP are attempting to rid themselves of a strident critic before the 2014 election. The left is, implicitly, saying: ‘you are trying to get rid of Vavi so that you can continue stealing from state coffers and selling us to the global corporations in whose pockets you now reside.’

The strategic planners around Zuma probably did want to get rid of Vavi and saw the sexual misconduct as an opportunity to do so with the least cost to Alliance strength and unity. However a result that leads to Numsa splitting from Cosatu might end up being catastrophic for Zuma and his allies. Numsa is the best organised and most militant union in Cosatu. It already effectively competes with Num (at Medupi for example) and if it were to set itself up in competition to other Cosatu unions the platinum sector circa-2012 could, conceivably, end up looking like a labour-relations picnic. Such a split could also cause unforeseeable disruptions in the ANC’s electoral support, conceivably leading to a political realignment and possibly to the formation of a ‘left’ or ‘workers’ party.

However, the Zuma administration and the central ANC leadership is desperately trying to unite the constituent elements of the Alliance behind the National Development Plan – partly in an attempt to prove to global capital markets and other investors that the ANC is serious about creating a settled environment for investment, and partly because it appears to believe that plan is the right path to ensure increased levels of economic growth and employment. Numsa sees the NDP as a direct extension of the ‘neoliberal’ Growth, Employment and Redistribution macroeconomic policy.

To understand more fully what is at stake here it is interesting to examine how Numsa, in its own words, understands the NDP and GEAR and how it interprets the ‘real’ reasons the Zuma leadership is attempting to get rid of Vavi:

“The capitalist neoliberal trajectory which the ANC leadership had adopted”, designed to “ deepened and entrenched South African capitalism” and “ it also laid the grounds for deepening imperialist domination in South Africa” … “allowed monopoly capitalism to evade expropriation“ … “thus in fact GEAR negated one of the fundamental objectives of any liberation struggle – the elimination of imperialism”. Finally: “Inevitably, the rupture in Cosatu is between those who want to see a thoroughgoing implementation of the Freedom Charter … and those who are consciously or unconsciously defending South African capitalism and imperialism by defending the NDP and not openly supporting the implementation of the Freedom Charter, especially its nationalisation demands.”

The stakes are high. The Zuma administration needs to prove to investors that these political positions are not represented in ANC policy making AND it has to keep the Ruling Alliance intact. The disciplining of Vavi today brings this to a head. The Zuma aligned faction probably wants to achieve a disciplining of Vavi with regard to his public utterances but to a degree that keeps Numsa in the tent. It’s a delicate balance and fraught with risk.

The Democratic Alliance – much talk of the possibility of taking Gauteng

The DA Electoral College decided late last week that Mmusi Maimane will head its campaign to take Gauteng from the ANC is 2014. Maimane stood against Jack Bloom for the position of ‘premier candidate’ for the DA in Gauteng. The election comes amidst increased media speculation that the Official Opposition could realistically pursue victory against the ANC in the economic heartland of the country.

So what?

The peculiarly South African ‘coded’ relevance of this story, is that Maimane is black and Bloom is white – and therefore the DA electoral college’s choice of Maimane over the more experienced Bloom is seen as indicative of the DA’s decision to ‘go all out’ to win a greater share of the black vote, especially in the region where it is assumed that ‘urban African professionals’ are both most abundant and most likely to be disaffected with corruption and ANC failures of governance.

At this distance out from a national election any definite prediction about results should be taken with a mountain of salt. Parties are either trying to talk up their chances or are predicting dire results to scare their members and supporters into campaigning mode. In the 2009 election the Democratic Alliance won 16.6% of the vote in Gauteng and it is vanishingly unlikely that the party will win a majority in the province in 2014. It is conceivable that the DA could find itself in a position to lead an alliance of parties to victory over the ANC in the province next year. However the parties themselves and their expensive private polling consultants possess the only real ‘scientific‘ (probably ’empirical’ is better) – ed) data. Any hints that emerge into the public domain that come from those party contracted polling agencies are probably designed to serve specific party objectives, rather than the truth – and should be treated with maximum scepticism.

Zuma expected to tell SADC ‘our work in Zimbabwe is done’

It is unlikely that the 15 member SADC Heads of State meeting scheduled to take place on August 17 will call for a coalition government in Zimbabwe – as the body did after the disputed 2008 elections. City Press reported on Sunday that a source close to the South African mediation effort has said: “As far as South Africa is concerned, we have ended mediation in Zimbabwe”. It is likely that the regional body will vote to accept the election result (although not unequivocally and not without polite reservations) and further, that the body will call for the UK and the US to drop sanctions against Zimbabwe as part of an economic recovery plan.

So what?

The SADC is likely to err on the side of order if the trade-off is between political/economic stability and electoral fairness in the region. In 2008 the body assessed that the election was so unfair that accepting Mugabe’s refusal to acknowledge an MDC victory would be an unstable result. Thus the body forced Mugabe and his party into a coalition government. The estimation appears, this time around, to be that accepting a Zanu-PF victory is the more stable of the possible outcomes – and that stability is rooted in Zanu-PF having performed better and the MDC having performed worse this time around.

There is an interesting account in the Mail & Guardian of how Zanu-PF won Harare from the MDC that bears testimony to a real shift in voter sympathies in Zimbabwe – as opposed to purely cheating and skullduggery on Zanu-PF’s part (catch that story here). It is impossible to make a serious estimation of how much Zanu-PF’s victory was legitimate and how much a result of the aforementioned skullduggery. However, it is my opinion that the SADC will conclude that enough of the victory is ‘legitimate’ to declare it so, and thereby help make it so.

The outstanding questions, it seems to me, are:

• Will the party implement the indigenisation programme in a way that further drives foreign investment out of the economy?
• Will the party implement catastrophic monetary and fiscal policy?

It is probably a correct response to be ‘optimally cautious’ rather than ‘cautiously optimistic, given Zanu-PF’s serious mismanagement of the economy post-1999. However, it is also important to think of Zanu-PF and Mugabe as conscious and politically aware players in their game. Zanu-PF is likely to be cautious about policy – it is no longer necessary to implement ‘panic’ measures and any incumbent administration is likely to want to seek a degree of economic stability. This does not mean Zanu-PF will back-off ‘indigenisation’ – it appears to have worked for the party up to a point. But it does mean that Mugabe and his party are unlikely to implement indigenisation that further (i.e. any worse than it already has) breaks international norms and standards about property or in a manner that causes a stampede out of the economy. (Important qualification: One of my colleagues who specialises in analysing platinum companies has suggested that the indigenisation ‘deals’ that were struck prior to the election are actually coming ‘unstuck’ because Zanu-PF appears to believe it can get more favourable terms now that it has won such a divisive victory in the election. If that is, in fact, the case then it would be appropriate to be less confident of my formulation that “Zanu-PF is likely to be cautious about policy”.)

Additionally, a serious and high-risk ‘unknown’ is what might happen if and when Mugabe (finally) dies. My own assumptions about how history works is that individuals rarely make a huge difference to outcomes. However, through careful manipulation and a clever ruthlessness Mugabe has become the lynchpin of Zanu-PF power and I am uncertain as to what might happen if a vacuum suddenly appears in the space he currently occupies, but I think it is unlikely to be pretty.

Pravin Gordhan – mutters at The Treasury

“Finance Minister Pravin Gordhan’s leadership style has been called into question as treasury employees accuse him of taking a unilateral decision to cut performance bonuses by more than half, while failing to condemn publicly the expenditure on the multimillion-rand upgrade of President Jacob Zuma’s compound in Nkandla” – Mail & Guardian.

So what?

Aggrieved staff members are not necessarily the most reliable critics of the bosses for whom they toil. However, successive ANC governments have relied on the Department of Finance being a centre of excellence that consistently trains and/or attracts top, highly motivated and effective officials – so any signs of serious stress in the organisation is worthy of consideration. The article, from the ‘quality weekly’, quotes a ‘senior official’ in the following manner: “Since he [Gordhan] was appointed as minister, things have never been the same in the national treasury. He brought a management style that is foreign to the team of the national treasury. He sometimes speaks to the management team like they are kids. His leadership style has seen many of the senior treasury employees, including former director general Lesetja Kganyago, leaving … All he is focusing on is making sure that he is reappointed as the minister of finance after next year’s election. People here say that this is one of the reasons he does not condemn the enormous amount of taxpayers’ money that was spent on the president’s residence”

In the same story, the Democratic Alliance finance spokesman Tim Harris claims that recent replies by the Treasury to the party’s parliamentary questions revealed a ‘significant’ vacancy rate at senior levels within the department, “in particular, 25 senior employees have left the department in the past year,” he said.

We have to take this from whence it comes (aggrieved employees and the official parliamentary opposition) but the status and functioning of the previously above reproach Treasury is important enough to consider even the fruit of this tainted tree.

Julius Malema seeks spiritual guidance

City Press reported on Sunday that Julius Malema and his colleagues in the Economic Freedom Fighters left South Africa on Friday for a week’s visit to a massively popular Nigerian preacher in Lagos who has ‘prophesied’ a huge and bloody revolt in South Africa – presumably one led by Malema. The EFF said in a statement that this is a “spiritual visit to meet and create friendship with this son of Africa and his congregation, and ask for blessings on the journey ahead”.

So what?

Nothing really … it’s just that Malema’s antics are endlessly entertaining. Of course this lighthearted approach is based purely on the belief that Julius and cronies are never going to get anywhere in their political party endeavours. If the EFF ever looked like it was a real threat I would probably not be sniggering up my sleeve at their tormenting of the ANC …

I am in Serbia on a social visit and I thought I would record here some of my initial observations about stuff we might learn from this country about some aspects of SA politics and culture.

Cultural Betrayal

Firstly, I am in Belgrade – a city of 1.6 million people built on the confluence of the Danube and the Sava – and a peculiar mixture of modern flash, Soviet-era bland and medieval tatty. The scars of the Nato bombings are still dramatically evident in a sort of carefully preserved tableau, a series of monuments to that seminal betrayal, that you can’t miss on your way in from the airport

Serbian/Yugoslav Army HQ? Taken a few minutes ago (thanks Jaimo) – I will double-check what the building’s original function was … before it (and a few of its neighbours) were bombed on May 1 1999, becoming (permanent?) monuments to Western perfidy

Why betrayal? Because everyone my age here has the same (as me) … memealogy? (okay, I made it up – memes are cultural genes and you can work it backwards from genealogy). The cultural literacy is all Rolling Stones, Sam Peckinpah, Bruce Springsteen, Warren Zevon, The Alien, Bob Dylan, The Beatles and Billy Joel (you dredge up the cultural icon from the 60s, 70’s and 80’s and I bet I share it with Serbians of an appropriate age – except they are more culturally literate. Interestingly, just like in Yugoslavia, in SA we got this stuff a few years late – in SA because of apartheid and National Party awfulness, in Yugoslavia because of a slightly different set of transgressions.)

… and then one day their beloved Americans and English cultural tutors bombed them and killed the firemen trying to save people from the buildings – ostensibly to stop some new, particularly ugly, transgressions. Oh the treachery, the faithlessness …

Ethnic uniformity

The second thing that strikes me is the populace is ethnically identical. They are all white. There are no black people, no Arabic looking people; no any kind of people who are in any way different looking from what I think of as Slavic – which is just a minute variation on your bog standard white person – the men with chiseled features and the women with unusually long legs and everyone with white skin … not olive or dusky or anything, but white – in the old Apartheid conception of the skin colour.

“The city was more cosmopolitan”, my Serbian friend tells me, “before the disaster of Slobodan Milošević – before then you could see more Croats, Bosnians, Macedonians, Montenegrins, Muslims, Slovaks …”

We are wandering down a medieval street crammed with crowds of handsome young people. I ask him to show me some individual examples of these groups that survived the virtual and literal ethnic cleansing that accompanied the collapse of Yugoslavia.

His attempt seems half-hearted, even dispirited.

“Hmm maybe she is Croat,” he says indicating a woman flicking through some blouses at a street kiosk. She is one of the tall, long-legged, light-brown haired, chiseled cheek-boned and haughty beauties that shoal in these alleys, as ubiquitous as sardines at the right time in Durban.

“Ok, maybe not” he shrugs as I frown at him in confusion.

We finally manage to agree that “those gypsies” selling knock-off Ray-Bans look ethnically dissimilar to the majority. But to me it’s a margin call – any one of them could have been my old ‘Leb’ Catholic chinas in the Johannesburg of my youth; definitely ‘white’ under apartheid’s racial taxonomy.

Remember it took the terror of ethnic cleansing to create this level of uniformity, but even before that, in the old Yugoslavia, the full range of ethnic diversity could have been encompassed by the differences between, say Rafael Nadel and Charlize Theron …

Let’s compare monstrous barbarisms

Everyone here above a certain age seems haunted by what happened after the collapse of Yugoslavia. You would think that this lot would be immunised to bombs, betrayals, racial and religious purging and radical disjuncture in their social organisation.

It started with the Celts invading the “Paleo-Balkan tribes” in 50 000 BCE (okay, I’m exaggerating) who in their turn were replaced by an endless Roman occupation; sacked by Attila the Hun in 442 and then one thousand five hundred years of bloody, impossible to follow conquest, resistance, sacking, rapine, pillage … I could go on and on. It was the Byzantines, the Franks, the Bulgarians, the Kingdom of Hungary, the Crusades, the Serbian Empire (briefly) the Hungarians again, the Ottomans (for five hundred years! … and yes, they did persecute the Christians but not half as badly as the Christians did to almost anyone of any other faith during the Crusades … and there are a whole lot of beautiful and ancient churches that the Ottoman-Turk conquerors and rulers left standing) and the Austrians.

And of course, that is only before the First World War, and as you know all the important stuff happened since then.

I know our African and South African histories are important and it is appropriate that we wrestle as long as it takes – which will be forever, obviously – with the ongoing consequences of slavery, colonialism and apartheid.

But being here does tempt me to wish my countrymen and women had a slightly less myopic view of our own trials and tribulations. I read this morning that Belgrade is trying to scrape together the finances to build a memorial to Judenlager Semlin, the largest German-run concentration camp in Southeast Europe where in May 1942 the Nazi’s proudly announced one of their first major European campaign successes: Serbia was “Judenfrei”. The men had been executed earlier, but the last 7000 Jewish women and children were killed in the camp in the first few months of 1942.

By May Serbia was Judenfrei.

And this is not a The Holocaust trumps all kind of statement – I just mention it in the context of the previous 2000 years of European history. The Germans might have achieved a unique scale with their technological and organisational excellence, but the great rivers of cruelty and tears are old, deep and cold here and they flow through every valley of this geography – and not only to and from the mighty lake that was The Holocaust.

The Economy and the European Debt Crisis

The Serbian economy has hit the wall and the government is trying to decide on a balance between cutting public sector wages and salaries by about 6% and increasing VAT to about 22%. The options are limited and there is an absolute consensus that extremely hard times have arrived. This is the European debt crises writ slightly smaller – because Serbia is not part of the European Union.

But what I see are people eating and drinking in restaurants – and partying as hard and as healthily as it gets.

There are almost no beggars – and those that there are are obviously professionals with studied acts:

the near-sighted (with ridiculously cute thick glasses) slightly retarded child playing – very badly – the violin, every item of clothing and scuff on his thick medical black shoes a carefully choreographed act that everyone consents to and ignores.

An old hunched-backed crone, her nose not six inches from the floor, tapping along on a short, gnarled staff, an arthritis crippled hand held out blindly above her … I am convinced she is a 22-year-old actress who couldn’t find a waitressing job.

The point is there are none of the streams of dead-eyed, exhausted people searching and researching the refuse; people you will find in any South African city. There is a medieval character to Belgrade, which means there are a million nooks and crannies and little hollows in ancient buildings and monuments everywhere. In South Africa those would all be occupied – where they were fenced, the fences would be broken and tunneled under – there would be evidence that someone was eking out an existence in every hollow, in every gap.

But here, nothing.

Sure, there is an occasional drunk sleeping on a park bench, but that is pretty much as bad as it gets. I have absolutely no doubt that I am not seeing the whole picture and certainly there are large areas of the city with awful Soviet-era council housing-type tenements, covered for 10 metres from street level with graffiti that looks to me just like Cape Town’s gang signs.

In South Africa we feel like we are bursting out of our seams, with the poor competing intensely for the leavings of the rich and thereby driving some kind of desperate but highly energetic economy. Here it feels older and emptier, certainly dowdy in places, but calm and stoic.

Don’t get me wrong. These people descend from women who have thrown their babies onto invader’s spears; their forefathers and mothers have eaten dogs and rats and stones to stave off the inevitable rape and slaughter that awaits the fall of the castle walls; they have catapulted the last live chickens at their enemies who have besieged them for years, and successfully convinced the invaders to just give up and go home.

So I am not exactly saying that this is tired old Europe with nothing left to do but casually sip a coffee in the shade, sneering at the inevitable heat death that comes with impossible debt, dipping personal income and stagnant growth – of the economy and the population.

I am also not exactly saying that we are fresh and chaotic and ready to burst onto the global stage with the vigour and desperate energy of youth.

But there’s something in there, some little kernel or nugget – maybe a hope that I haven’t quite allowed myself to feel yet …

But it’s mid-afternoon and so hot that it is impossible to process this any further. Time for my first rakia and 4th double espresso – I’ll think about this tomorrow.

The Arch live on national television on Sunday night was full of his old and delightful twinkly theatricality.

“Watch out ANC government, watch out!”

My own view is he has every right to his anger and he expressed it with aplomb (and I am deliberately leaving aside placing the Dalai Lama anywhere on the continuum between “paragon of virtue” and “another narcissistic human-rights rock star” – because I think he is irrelevant to the question of the ANC’s moral failure in this case.)

Now Tutu didn’t actually say the ANC was either worse than, or equivalent to, the Nats, but I still wish he would keep in mind the problem of the inflation of metaphor.

He said that the ANC government’s failures of visa issuance are worse than those of the Nats – because at least with Apartheid’s masters you expected the worst.

Which is obviously still rubbish – even in this more limited form – to anyone who remembers how much focus was given the domestic and international movement of black people by the machinery of the Apartheid state.

But moral watchdogs are obliged to bark as loud at the gradual rise of tyranny as they do when that bloody moon reaches its apogee – which is why I am not going to quibble with the Arch; he is doing his job and all strength to him.

What I originally wanted to do was draw a graph using the 4 previous post-1994 South African visa applications (that I know of) for the Dalai Lama and plot them against the rise of China in Africa and the fall of principle within the ANC – but I think that has too many axes (including the grinding kind) and I couldn’t get it to work in Excel.

In 1996 Nelson Mandela invited the Dalai Lama and met him face to face; in 1999 Thabo Mbeki’s government gave him a visa as part of an international interfaith conference but refused to meet him; in 2009 Mbeki’s government refused him a visa altogether and today Zuma’s government has ignored the issue entirely.

You can plot those points yourself against this graphic that I have cobbled together:

The explanation for the changing stance of visa applications becomes fairly obvious when you track them along that curve.

And then, if you have the time or the inclination, feel free to suggest a speech bubble for the protagonists.

*If you are not South African that headline is going to be difficult to explain. “My china” is slang for “my good friend”. So “China’s my ANC” is a species of bad pun crossed with an unintelligible inside joke. (Note: It has been pointed out to me in the comments section below that “my china” meaning “my friend” comes from rhyming Cockney slang … China plate/mate … should get my brass tacks right.)

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I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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